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24–988 2005

H.R. 3505—FINANCIAL SERVICES

REGULATORY RELIEF ACT OF 2005

HEARING

BEFORE THE

SUBCOMMITTEE ON 

FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

OCTOBER 18, 2005

Printed for the use of the Committee on Financial Services

Serial No. 109–59

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SPENCER BACHUS, Alabama, Chairman

WALTER B. JONES, JR., North Carolina, 

Vice Chairman 

RICHARD H. BAKER, Louisiana 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SUE W. KELLY, New York 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

JUDY BIGGERT, Illinois 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

RICK RENZI, Arizona 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

BERNARD SANDERS, Vermont 

CAROLYN B. MALONEY, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

LUIS V. GUTIERREZ, Illinois 

DENNIS MOORE, Kansas 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

AL GREEN, Texas 

GWEN MOORE, Wisconsin 

WM. LACY CLAY, Missouri 

JIM MATHESON, Utah 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

October 18, 2005 ............................................................................................... 1

Appendix: 

October 18, 2005 ............................................................................................... 39

WITNESSES 

TUESDAY, OCTOBER 18, 2005

Beal, Bradley W., President/CEO, Nevada Federal Credit Union, Representing National Association of Federal Credit Unions ................................ 9

Buell, Phillip R., President/CEO, Superior Federal Credit Union, Lima, Ohio, 

Representing Credit Union National Association .............................................. 13

Hart, Norma Alexander, President, National Bankers Association .................... 11

Hayes, David, Chairman, Independent Community Bankers of America .......... 15

Rock, Bradley E., Chairman, President and CEO, Bank of Smithtown (New 

York), Representing American Bankers Association ......................................... 10

APPENDIX 

Prepared statements: 

Bachus, Hon. Spencer ...................................................................................... 40

Carson, Hon. Julia ............................................................................................ 42

Gillmor, Hon. Paul E. ....................................................................................... 43

Ney, Hon. Robert W. ........................................................................................ 44

Beal, Bradley W. ............................................................................................... 45

Buell, Phillip R. ................................................................................................ 64

Hart, Norma Alexander ................................................................................... 89

Hayes, David ..................................................................................................... 92

Rock, Bradley E. ............................................................................................... 120

(1)

H.R. 3505—FINANCIAL SERVICES 

REGULATORY RELIEF ACT OF 2005

Tuesday, October 18, 2005

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 10 a.m., in Room 

2128, Rayburn House Office Building, Hon. Spencer Bachus [chairman of the subcommittee] Presiding. 

Present: Representatives Bachus, Castle, Royce, Lucas, Kelly, 

Gillmor, Ryun, Oxley (ex officio), Biggert, Feeney, Hensarling, 

Brown-Waite, Pearce, Neugebauer, Maloney, Moore of Kansas, 

Kanjorski, Frank (ex officio), Hooley, Carson, Ford, Israel, Baca, 

Green, Moore of Wisconsin, Clay and Matheson. 

Also present: Representative Ney. 

Chairman BACHUS. Good morning. The Subcommittee on Financial Institutions and Consumer Credit is meeting today to focus on 

H.R. 3505, the Financial Services Regulatory Relief Act of 2005, 

which was authored by Congressman Hensarling and Congressman 

Moore in July. H.R. 3505 seeks to reduce the Regulatory Board on 

Insured Depository Institutions to benefit consumers and the economy by lowering costs and improving productivity. This legislation 

follows three earlier hearings, or this legislative hearing follows 

three earlier hearings on regulatory relief where we have on many 

occasions heard from financial institutions for the need for Congress to eliminate unnecessary regulations. 

Last month we received recommendations on H.R. 3505 from regulators. Today we will hear from representatives of the financial 

services industry, including our panelists today, Nevada Federal 

Credit Union President and CEO Bradley Beal, on behalf of the 

National Association of Federal Credit Unions; Bank of Smithtown 

Chairman, President and CEO Brad E. Rock, on behalf of the 

American Bankers Association, and Congressman Israel is going to 

introduce him. We also have on behalf of the National Banking Association—I am sorry, National Bankers Association President 

Norma Alexander Hart; and then Superior Federal Credit Union of 

Lima, Ohio, CEO Phillip Buell, on behalf of the Credit Union National Association; and Independent Community Bankers of America Chairman David Hayes. 

I look forward to hearing from today’s witnesses and thank them 

for taking time from their busy schedule to join us. 

2

Under Chairman Oxley’s leadership this committee has been 

dedicated to freeing depository institutions from unduly burdensome regulations so that they can be more effective to meeting the 

credit needs of their communities. During the 108th Congress the 

committee produced a comprehensive regulatory relief bill that 

passed the House by a margin of 392 to 25. That was actually H.R. 

1375. Unfortunately, the Senate took no action. 

H.R. 3505 draws from and supplements the provisions of last 

year’s bill. Additionally it includes provisions from legislation sponsored by Mr. Ryun of Kansas, H.R. 2061, the Community Banks 

Serving Their Communities First Act; and legislation sponsored by 

Mr. Royce and Mr. Kanjorski, Mr. Royce of California and Mr. Kanjorski of Pennsylvania, H.R. 2317, the Credit Union Regulatory Improvements Act, CURIA. I applaud the goals of these bills which 

would allow banks and credit unions to devote more resources to 

the business of lending to consumers and less to the bureaucratic 

maze of compliance with outdated and unnecessary regulations. 

Let me close by commending Congressman Hensarling, Congressman Moore, Chairman Oxley, Ranking Member Frank and Ranking Member Sanders, Mr. Ryun, Mr. Royce, Mr. Kanjorski, and all 

other members of the committee who have worked tirelessly on this 

important piece of legislation. I look forward to working with them 

and the rest of the members of this committee as we move toward 

a markup and floor consideration in the coming weeks. 

[The prepared statement of Hon. Spencer Bachus can be found 

on page 40 in the appendix.] 

Chairman BACHUS. At this time I am pleased to recognize the 

ranking member of the full committee Mr. Frank for an opening 

statement. 

Mr. FRANK. Thank you, Mr. Chairman. I am glad we are going 

ahead with this, and I think as someone who believes there is an 

important role for regulation in achieving important goals, that an 

essential part of regulation is getting regulation right. And overregulating and regulating badly undercuts the notion of the proper 

balance between a private and public sector operation. 

For example, one of the things we will be doing is reducing some 

of the requirements of the Bank Secrecy Act. Instinctively people 

get nervous about that. They are afraid of being open to charges 

that we are somehow weakening our defenses. In fact, when the 

enforcement agencies are flooded with a lot of paper that really has 

nothing to do with abuses, that is what weakens law enforcement. 

Gresham’s law says that the bad drives out the good in currency. 

With regard to this sort of law enforcement, there is a modification 

of Gresham’s law: The good can cover up the bad. The amount of 

paper that people have to wade through almost literally diminishes 

their ability to focus on those things that they should be finding. 

It is hard enough to find these particular needles when people are 

trying to cover them up; we should not be pouring more hay on, 

and that is what we do when we require excessive information. 

So I want to reassure all my colleagues that this has been carefully worked out. And I congratulate the Department of Treasury, 

FINCEN, and the American Bankers Association. A number of people here did a very good job of getting together and understanding 

the goal, figuring out how better to accomplish it. So this is a bill 

3

that serves the purposes of sensible regulation, and it serves as 

what I think ought to be the goal of this committee, which is providing an atmosphere in which the private sector, particularly 

those in the financial industry, can do the essential job that it has 

to do of providing the capital and the liquidity for the economy and 

at the same time protecting those legitimate public interests which 

have to be protected, but in a rational way. 

And then finally I would note this is one more example of the 

ability of this committee. I think it is important to stress this. We 

often talk about how bipartisan we are. I think it is important for 

this committee and every other arm of the Congress to be both bipartisan and partisan sometimes in the same week. That is, there 

are legitimate differences between the parties. There are legitimate 

issues that we ought to have debate about. What this committee 

shows, I think, is that you can have those debates on those issues 

which divide us without that poisoning the atmosphere, so that 

when we come together on things like this where there are really 

technical issues and not ideological ones that we ought to be able 

to work together, we are able to do that. And, Mr. Chairman, I 

would say to the chairman of the subcommittee that you deserve 

a great deal of the credit for creating that kind of atmosphere. 

So I look forward to our not just having this hearing, but marking up a bill and, I would hope, passing this as soon as possible. 

Certainly there is no reason why we shouldn’t be passing it here 

before the end of the year. And as to the Senate, we will see what 

happens. But the sooner we send them something, the likelier we 

are to see some positive action. 

Thank you, Mr. Chairman 

Chairman BACHUS. Thank you, Mr. Frank. And I very much appreciate those remarks and appreciate working with you on this 

legislation. 

I now recognize one of the sponsors of this legislation, the principal sponsor along with Mr. Moore, Mr. Hensarling. 

Mr. HENSARLING. Thank you, Mr. Chairman. And first let me 

again thank you for your leadership in doggedly pursuing this 

issue. Even though he is not here, I want to thank Chairman Oxley 

for his leadership as well, and to follow up on the ranking member’s comments in creating a place in Congress where one can truly 

work in a bipartisan fashion. I want to thank Ranking Member 

Frank for his contributions to this. And as a former student of economics, I especially appreciate anybody who can properly cite 

Gresham’s law. So that impresses me as well. 

I want to thank Mr. Moore, my colleague from Kansas, for his 

contributions and working closely together with him on this bipartisan piece of legislation and my colleague Mr. Ryun of Kansas for 

his leadership in the Communities First Act, a number of provisions which were included in this act, as you well know, Mr. Chairman, and as you have cited. 

Clearly the time for some regulatory relief is upon us. We all 

know that many regulations, although well intended, have costs associated with them. Many of these costs end up being imposed ultimately upon consumers. Many regulations are duplicative. Many 

have unintended consequences. Sometimes I think we excel at unVerDate 0ct 09 2002 13:28 Dec 28, 2005 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\DOCS\24988.TXT FIN1 PsN: MICAH
4

intended consequences in Congress. Some outlive their purposes, 

and some never achieve their purposes in the first place. 

At the end of the day, these excessive regulations can make credit less affordable and less accessible to people in our society who 

need it the most. They can prevent somebody from buying their 

first home, buying an automobile they need to commute to work, 

or maybe even capitalizing a small business and creating new jobs. 

They can also hurt consumers in another way, and that is they can 

drive out competition. They create fewer choices for the consumer 

in the financial services marketplace. 

We have heard testimony earlier that in the last decade community banks, which I think are vital to the economic lifeblood of 

rural America, have contracted from roughly 13,000 to roughly 

8,000. One of the reasons this is happening is because of a disproportionate regulatory burden. As we know, our banks have had 

to contend with approximately 850 new regulations since 1989. 

They cannot keep up with this particular burden. 

If we want to help the economic development of rural America, 

if we want to help our inner cities, if we want to help our consumers, we do have to have some regulatory relief. I believe that 

H.R. 3505 goes a long way in achieving that. It makes great 

strides. It doesn’t include every provision I would like, but I think 

we have done a good job in achieving significant consensus within 

this committee, and I think that we strike a good balance on a 

number of issues, and that we will hopefully at the end of the day 

see this actually become the law of the land. 

Thank you, Mr. Chairman, and I yield back. 

Chairman BACHUS. Thank you, Mr. Hensarling. 

Mrs. Maloney. 

Mrs. MALONEY. Thank you, Chairman Bachus and Ranking 

Member Frank. And I welcome all of the witnesses, particularly 

Mr. Rock from the great State of New York. We are glad you are 

here, and we look forward to hearing all of your testimony. 

As a Representative from New York, the financial center of the 

United States, I am particularly concerned about the burdens that 

regulations and reporting requirements impose on our financial institutions, particularly those that are not megainstitutions, but are 

midsize and smaller. And I know that the vast majority of my colleagues feel the same way. That is why we have come forward with 

basically a bipartisan consensus on this bill. We had it last year 

when we passed reg relief overwhelmingly. It died in the Senate. 

But this bill before us is an improved version and addresses areas 

of special concern to me. 

I applaud the leadership of Congressman Frank in working out 

an agreement for the ILCs, and I must say that wherever I go in 

my district, smaller institutions tell me how hard and costly it is 

to comply with the requirements of the BSA Act to file the CTRs, 

the SARs. They say the burden, the paperwork, is just overwhelming, and it is particularly hard on smaller institutions where 

the costs of compliance are a much higher proportion of their resources. And this bill includes a new section that addresses these 

concerns. It is not perfect, but it is a step in the right direction. 

And I look forward to continuing to work with Chairman Bachus, 

FINCEN, and others to further refine the exemption process that 

5

we require in a new section 701 that FINCEN and law enforcement 

finds viable and that will help in their oversight, too. I think that 

this is a critical part of the bill. 

Also, this bill contains the Credit Union Regulatory Improvement 

Act, which I have supported in several Congresses, and these provisions offer relief to credit unions. And I hope that we will be able 

to move forward in this bill and finally pass the remaining portions 

of CURIA, especially the reforms to the prompt corrective action 

system and the conversion provisions. I believe that these additional reforms will bring valuable certainty to the credit union sector of the market. 

So I thank everyone for coming, and I look forward to your testimony and hopefully passage of the bill. 

Thank you. I yield back 

Chairman BACHUS. Thank you. 

I am told that no other members of the—Mr. Chairman. Chairman Oxley. I am sorry. 

Mr. OXLEY. Thank you, Mr. Chairman. I want to thank you for 

holding this hearing on H.R. 3505. I sneaked in on you, Mr. Chairman. Your peripheral vision is not what it used to be. 

Chairman BACHUS. I knew you were here. They just didn’t tell 

me you wanted to speak. 

Mr. OXLEY. I want to thank you for holding this hearing on the 

Financial Services Reg Relief Act of 2005 and look forward to hearing from the financial services industry trade groups with their 

views on H.R. 3505 and how this bill provides much-needed relief 

from outdated, unnecessary regulations. 

The case for giving banks, credit unions, and other financial institutions regulatory relief has never been stronger. This Congress 

we have held three hearings on this important subject. The FDIC 

has testified that since 1989, Federal regulators have issued over 

800 separate regulations affecting financial institutions, requiring 

significant adjustments to existing systems and other costly steps 

to ensure compliance. And while no one is suggesting that these 

regulations are not well intentioned, the sheer volume of mandates 

emanating from Washington makes it incumbent upon those of us 

in the Congress to find ways to ease regulatory burdens where we 

can so that the financial services industry can focus more of their 

finite resources on serving customers rather than contending with 

bureaucratic red tape. 

This year the legislation has been introduced by two well-respected members of our committee, Mr. Hensarling and Mr. Moore, 

which builds on the provisions in the regulatory relief bill that won 

overwhelming approval in the House last year, but was never 

taken up in the Senate. H.R. 3505 includes virtually all of the provisions of last Congress’s reg relief bill, a new title that addresses 

Bank Secrecy Act issues, and over 20 new provisions. And I want 

to thank both the gentleman from Kansas and the gentleman from 

Texas for their leadership on this issue. 

I want to thank the witnesses for appearing here today, particularly Phil Buell from Lima, who represents the—who is president/

CEO of Superior Federal Credit Union in Lima, Ohio, in the 

Fourth Congressional District. Other than the fact that he went to 

2 MAC schools that were not Miami, he is a fine, upstanding citVerDate 0ct 09 2002 13:28 Dec 28, 2005 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\DOCS\24988.TXT FIN1 PsN: MICAH
6

izen and a good representative of the credit union industry. I look 

forward to their comments on the bill. 

We can achieve regulatory relief for deposit institutions so they 

can better serve their customers and their communities. And, Mr. 

Chairman, let me again salute your leadership on this issue. This 

is now a time to punch it across the goal line, and I think if we—

I suspect we will get a good, strong bipartisan vote in the committee when we mark this legislation up, and then also on the 

floor, to get a good head of steam over in the other body. I know 

that Senator Crapo, among others, has expressed an interest, and 

we have already had a hearing, which is progress certainly on that 

side of Capitol, and we are hopeful that this session of the Congress we can come to fruition and get this bill passed and signed 

by the President. 

The pressures are enormous on the financial institutions. We 

have asked them to do an awful lot with the PATRIOT Act, with 

the Bank Secrecy Act, all of those regulations, the 800 and some 

regulations coming down from above. It is clearly a time for regulatory relief. And again, now is the time to get it done. And I yield 

back 

Chairman BACHUS. I thank the Chairman. 

And my eyesight is not as good as my leadership, I guess, right? 

But I had an opening statement, and I went on and on about your 

leadership. And Mr. Frank also complimented you. 

At this time we will hear from Mr. Moore who obviously with Mr. 

Hensarling, as we have all heard, introduced this legislation and 

played a key role in it. 

Mr. MOORE OF KANSAS. I would like to thank my friend Chairman Bachus for sponsoring the hearing today, convening this hearing. I would also like to thank Chairman Oxley for his leadership 

in this area. You have been very strong, and I really appreciate 

that. And, Chairman Bachus, thanks for scheduling today’s hearing 

on regulatory relief legislation, H.R. 3505, which was introduced by 

Congressman Hensarling and myself and cosponsored by 32 members of this committee on both sides of the aisle. And that is one 

of the gratifying things to me about this committee is the bipartisanship which we on many, many occasions are able to achieve 

that sometimes other committees in Congress don’t get, and I really, really appreciate that. The Financial Services Committee has a 

strong record of bipartisanship, and I am glad it has extended to 

this bill. Regulatory relief should not be about Republicans or 

Democrats. It should be about doing the right thing for the lenders 

in our communities who have played such an important role in expanding home ownership and for creating opportunities for businesses and consumers. 

Small lenders in our communities particularly feel the burden of 

unnecessary regulations. Whenever Congress or the regulatory 

agencies impose a new burden on industry, small institutions must 

devote a large percentage of their staffs’ time to review the new 

law or regulation, determine if and how it will affect them. Compliance with new laws and regulations, while sometimes necessary, 

nearly always takes a large amount of time that businesses cannot 

devote to serving their customers and our constituents. 

7

Strong regulation of our country’s financial system is absolutely 

essential, but Congress and the financial regulators have a responsibility to strike the right balance in this area, and 3550 is an important step in the right direction, I believe. 

Since coming to Congress, and particularly over the last few 

months, I have heard from many depository institutions in my district and throughout Kansas, and I have tried to address in 3505 

some of the concerns that I have heard. While assets for Statechartered banks in Kansas have reached an all-time high of $27 

billion, our communities’ banks are also struggling to comply with 

both old and new reg burdens, including some created under the 

Bank Secrecy Act. 

3505 seeks to provide relief from some of these new burdens to 

our financial institutions in a way that preserves our ability to 

track terrorist financing and build upon our success in freezing the 

funds of terrorists. Representative Hensarling and I and the bill’s 

bipartisan cosponsors agree that waging a strong war on terror and 

providing some reg relief to our financial institutions are not incompatible goals. 

Additionally, 3505 provides two new sections of reg relief for our 

credit unions that were not included in the previous version of this 

measure, 1375. This subcommittee and the full committee both 

passed the reg relief bill by voice vote during the 108th Congress, 

and the House passed it 1 year ago by a wide margin, 392 to 25. 

I look forward to continuing the broad bipartisan cooperation on 

this legislation that we have enjoyed in the past. Again, thank you, 

Chairman Bachus, and I look forward to hearing from the witnesses. 

Chairman BACHUS. Thank you. 

At this time are there any other opening statements that members would like to make? 

Without objection, the gentleman from Ohio, Mr. Ney, will be 

permitted to participate in today’s hearing. Although he is not a 

member of the subcommittee, he is chairman of the housing subcommittee, and we welcome you. 

Mr. NEY. Thank you, Mr. Chairman. I don’t—I would just like 

permission to enter my statement for the record without reading it, 

with one amended part; that Mr. Oxley is a great Ohio leader. 

[The prepared statement of Hon. Robert W. Ney can be found on 

page 44 in the appendix.] 

Chairman BACHUS. And without objection, opening statements of 

all members will be introduced in the record. And I know Mr. Baca 

and other members have opening statements that they wish to submit. 

I would like to introduce our panel now. Mr. Brad Beal is president/CEO of the Nevada Federal Credit Union, which is the largest 

credit union in the State of Nevada with 82,000 members. He, prior 

to that, was at other credit unions, both in Nevada and Utah. And, 

Ms. Biggert, he is a native of Illinois and is proud of that fact and 

graduated summa cum laude from Bradley University in Peoria, Illinois. He is also a certified public accountant and a member of the 

American Institute of Certified Public Accountants. 

Our next panelist, Mr. Israel, I am going to recognize you for an 

introduction of. 

8

Mr. ISRAEL. Thank you, Mr. Chairman. Thank you for giving me 

the privilege of introducing Brad Rock, who has been a key advisor 

and a good friend on Long Island. And I should say, Mr. Chairman, 

parenthetically that one of the sponsors of this resolution, Mr. 

Moore, happened to have been on Long Island last weekend, visited 

Smithtown as guests of my wife and myself. 

Mr. Rock has served as chairman of the board, president and 

chief executive officer of the Bank of Smithtown and its public 

holding company, Smithtown Bankcorp, for the past 16 years. The 

Bank of Smithtown is a 96-year-old community bank on Long Island with assets of approximately $750 million. He currently serves 

as chairman of the ABA Government Relations Council. He has 

previously testified before the House Financial Institutions Subcommittee, the Senate Banking Committee, and he is also a former 

president of the Independent Bankers Association of New York 

State. 

And, Mr. Chairman, I know we all have constituents like Mr. 

Rock who are so tenacious, so persistent, and so diligent, they don’t 

even take yes for an answer. They just keep asking and asking. 

And I am pleased to introduce Mr. Rock. 

Chairman BACHUS. It is my pleasure to introduce Norma Alexander Hart. Ms. Hart has been the president of the National Bankers Association since 1997. And actually you were first with the 

National Banking Association back in the early 1980s, before she 

left to work at United National Bank in Washington, D.C., which 

was a minority-owned bank which later merged with Madison National Bank, and she served as a marketing officer and rose to the 

position of assistant vice president. She received her B.A. from the 

University of the District of Columbia. She resides in Washington, 

D.C., with her husband, attorney Tom Hart, and you all have three 

children. And you don’t have a plane to catch after this hearing? 

And we welcome you. She has an extensive resume. And we welcome you and look forward to your testimony. I think this is the 

first time you have testified before this committee; is that correct? 

That is correct. So we welcome you, Ms. Hart. 

Mr. Phillip Buell is our next panelist, who is representing 

CUNA, Credit Union National Association. Chairman Oxley has 

previously introduced Mr. Buell. We welcome you. It seems like we 

always have an Ohio representative on our panel, and we welcome 

you. 

Our last panelist is David Hayes. David, you have testified before 

the committee on four or five previous occasions as a representative 

of the independent community banks, and we welcome you back before the hearing. 

He is president/CEO of Security Bank of Dyersburg, Tennessee. 

As we have said before, he is very active in serving as chairman 

of the board back in Dyersburg of the United Way and the Heart 

Association and various other civic boards. And we appreciate your 

testimony. He is wearing a Tennessee Vols tie, not realizing that 

I represent the University of Alabama, and that this weekend the 

University of Tennessee and the University of Alabama meet in 

Tuscaloosa. And it is probably good that he has got that tie on this 

week instead of next week. But, no, we have joked about that. 

9

So we welcome all our panelists this morning. And at this time, 

without objection—we have already done that. At this time I am 

going to recognize Mr. Beal for your opening statement. 

STATEMENT OF BRADLEY W. BEAL, PRESIDENT/CEO, NEVADA 

FEDERAL CREDIT UNION, REPRESENTING NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS 

Mr. BEAL. Thank you, Mr. Chairman. And good morning, Mr. 

Chairman, Ranking Member Sanders and members of the subcommittee. My name is Brad Beal, and I am the president and 

CEO of Nevada Federal Credit Union, which is located in Las 

Vegas, Nevada. I am here today on behalf of the National Association of Federal Credit Unions to express our views on H.R. 3505. 

As with all credit unions, Nevada Federal is a not-for-profit financial cooperative governed by a volunteer board of directors who are 

elected by our member-owners. 

I am pleased to report to you today that America’s credit unions 

are vibrant and healthy and that membership in credit unions continues to grow, now serving over 87 million Americans. At the 

same time, according to data obtained from the Federal Reserve, 

credit unions have the same market share today in terms of financial assets as they did back in 1980, that being 1.4 percent, and 

as a consequence provide little competitive threat to other financial 

institutions. 

NAFCU would like to thank Representatives Hensarling and 

Moore for their leadership in introducing H.R. 3505. We support 

the credit union provisions included in title 3 of that bill. We believe these provisions are a positive step in addressing many of the 

regulatory burdens and restrictions on Federal credit unions. 

The facts confirm that credit unions are more heavily regulated 

than other consumer financial services providers. Furthermore, 

NAFCU is pleased to see the efforts of title 7 to help reduce the 

Bank Secrecy Act compliance burden on many financial institutions. 

While we believe H.R. 3505 is a solid bill as introduced, we believe that it can be made stronger by including much-needed additional provisions from the Credit Union Regulatory Improvements 

Act, also known as CURIA. I would like to thank Congressmen 

Royce and Kanjorski for taking the lead in introducing this vital 

legislation that has received bipartisan support of about 100 cosponsors. 

NAFCU urges the subcommittee to add language to H.R. 3505 to 

modernize credit union capital requirements by redefining the net 

worth ratio to include risk assets as proposed by the NCUA and 

included in Title I of the CURIA bill. This would result in a new, 

more appropriate measurement to determine the relative risk of a 

credit union’s balance sheet and also improve the safety and soundness of credit unions and our Share Insurance Fund. I would like 

to point out that the current capital system treats a 1 year unsecured $10,000 loan the same as a 30-year mortgage that is on its 

last year of repayment. This simply does not make sense. 

We are moving from a model where one size fits all to a model 

that considers the degree of risk in each credit union’s balance 

sheet. This proposal advocates a reduction in the standard net 

10

worth or leverage ratio requirements for credit unions to a level 

comparable to, but still greater than, what is required of FDIC-insured institutions. Further strength is gained because this proposal 

advocates a system involving complementary leverage and riskbased standards working in tandem. 

NAFCU also asks the subcommittee to refine the Member Business Loan cap established as part of the Credit Union Membership 

Access Act back in 1998, replacing the current formula with a flat 

rate of 20 percent of the total assets of a credit union. We support 

revising the definition of a member business loan by giving NCUA 

authority to exclude loans of 100,000 or less from counting against 

the cap. There is a lot of rhetoric about this issue out there, but 

I note that a 2001 Treasury Department study entitled Credit 

Union Member Business Lending concluded that, quote, credit 

unions’ business lending currently has no effect on the viability and 

profitability of other insured depository institutions, close quote. 

In conclusion, the state of the credit union community is strong, 

and the safety and soundness of credit unions is unquestionable. 

Nevertheless, there is a clear need to ease the regulatory burden 

on credit unions as we move forward in the 21st century financial 

services marketplace. NAFCU supports H.R. 3505, but believes it 

can be made even stronger by adding amendments to modernize 

credit union capital requirements and refine the arbitrary credit 

union member business lending cap. We look forward to working 

with you on these important matters, and we would welcome your 

comments or questions. 

Thank you, Mr. Chairman. 

Chairman BACHUS. Thank you, Mr. Beal. 

[The prepared statement of Bradley W. Beal can be found on 

page 45 in the appendix.] 

Chairman BACHUS. And all panelists, your written statements 

will be made a part of the record, and of course we are—you are 

just giving a 5-minute opening statement. And appreciate, Mr. 

Beal. 

Mr. Rock, you are recognized. 

STATEMENT OF BRADLEY E. ROCK, CHAIRMAN, PRESIDENT, 

AND CEO, BANK OF SMITHTOWN (NEW YORK), REPRESENTING AMERICAN BANKERS ASSOCIATION 

Mr. ROCK. Thank you, Mr. Chairman. 

I am chairman, president, and CEO of Bank of Smithtown, an 

$800 million community bank located in Smithtown, New York, 

founded in 1910. I am also the vice chairman of the American 

Bankers Association. 

Competitive inequities and the cost of unnecessary regulation is 

a serious long-term problem that continues to erode the ability of 

banks to serve our customers and support the economic growth of 

our communities. We applaud the efforts of the committee to reduce the regulatory burden on banks and to restore balance to the 

regulatory process. 

I have included a list of recommended actions with my written 

testimony, each one of which would provide much-needed regulatory relief to my bank and others like mine, but today there are 

three especially timely issues that I would like to emphasize. 

11

First, ABA believes that the current CTR standards have outlived their utility in detecting criminal activity. Maintaining the 

CTR threshold at the current level generates too many reports with 

immaterial activity and wastes banker and law enforcement time. 

This time could be better spent on suspicious activity report detection and investigation. The solution is to eliminate the CTR requirements for seasoned customers with transaction accounts. At a 

recent hearing before this committee, Financial Crimes Enforcement Network Director William Fox and other chief regulators supported this idea. The time has come to enact this reform. 

Second, I understand that there may be efforts to incorporate 

provisions of H.R. 2317, the Credit Union Regulatory Improvements Act, with the regulatory relief legislation pending before this 

committee. We urge the committee to reject H.R. 2317 and not incorporate its provisions into a larger regulatory relief package. H.R. 

2317 would greatly expand credit union commercial lending authority while at the same time undercut the regulation of capital levels 

at federally insured credit unions. These changes would fuel even 

more rapid expansion of a segment of the credit union industry 

that openly flaunts its congressionally mandated mission to serve 

people of modest means. Today more than 100 credit unions surpass $1 billion in assets 

and use their tax exemption to compete head to head with taxpaying banks. These conglomerate credit unions are much larger 

than the typical community banks in their local market, which 

have an average asset size of approximately $100 million. The current tax-exempt status of these diversified conglomerate credit 

unions and lack of equivalent regulation has created huge competitive inequities in the local marketplace and represents an ever-increasing abuse of the credit union tax subsidies. H.R. 2317 would 

exacerbate these competitive inequities as well as raise safety and 

soundness concerns. 

Third, Wal-Mart’s recent application for an industrial loan corporation charter and Federal deposit insurance has triggered renewed interest in commercially owned ILCs. ABA has long taken 

the position that commercial firms should not own banks or savings institutions because of the potential of conflicts of interest, 

particularly in the credit-granting process, and because of the potential for an unhealthy concentration of economic power. 

The ILC charter remains an open avenue for commercial firms, 

even those large firms that are not primarily financial in nature, 

to provide retail and corporate banking services. Therefore, ABA 

supports language in the regulatory relief bill to deny new commercially owned ILCs de novo branching authority and look forward to 

working with the committee on the broader issue of commercially 

owned ILCs. Thank you, Mr. Chairman. 

Chairman BACHUS. Thank you, Mr. Rock. 

[The prepared statement of Bradley E. Rock can be found on 

page 120 in the appendix.] 

Chairman BACHUS. Ms. Hart. 

STATEMENT OF NORMA ALEXANDER HART, PRESIDENT, 

NATIONAL BANKERS ASSOCIATION 

Ms. HART. Thank you, Chairman Bachus. 

12

Good morning, Chairman Bachus, Ranking Member Sanders, 

and other distinguished members of the Subcommittee on Financial 

Institutions and Consumer Credit. My name is Norma Alexander 

Hart. I am president of the National Bankers Association. It is my 

pleasure to provide comments on behalf of the Association regarding H.R. 3505, the Financial Services Regulatory Relief Act of 2005, 

pending Congress. 

For nearly 80 years the NBA has served as the trade association 

advocating for minority- and women-owned financial institutions. 

Moreover, the NBA and its 50 member banks and 30 associate 

members has worked with the Federal Government to develop policies, regulations, and laws that recognize the importance of preserving and fostering minority-owned and -controlled banking institutions. 

Regulatory relief has been around for years. First let me commend the committee for its hard work on this issue. We have been 

supporting this effort for a number of years on the Hill. The NBA 

is pleased to support the overall thrust of the regulatory relief bill. 

There are many regulations that need to be updated or in some 

cases eliminated to make the banking industry more competitive 

and available to the American public, to many lower-income Americans that are still unbanked, and we hope that this bill will make 

it easier for financial institutions to offer services to this important 

segment of our population. 

The purpose of the act is to update regs and to lift the regulatory 

burden on banks. The regulations imposed by the regulators often 

disproportionately burden the minority- and women-owned banks. 

Efforts should be made to streamline compliance of regulations 

that are intrusive and costly to banks with deposits of 3 million or 

less; for example, Sarbanes-Oxley internal controls, IT compliance, 

Bank Secrecy Act, privacy issues, and PATRIOT Act reporting. 

Each of the above regulations impose a high cost of compliance. 

These costs impose a severe burden on small, minority-owned institutions. 

Three, de novo banks. Specifically we note our concern about the 

provisions of the act that open the financial services industry to enterprises and industries that would use banking and mortgage 

lending as an ancillary service to their primary business. The NBA 

does not believe financial services should be provided as a commodity at over-the-counter stores or fast-food restaurants. Consumers should not go mortgage shopping at the same time they go 

food shopping. This will undermine the safety and soundness of the 

banking industry in America. 

The NBA is concerned about nontraditional ownership of financial institutions. Regulators must take a fresh look at this issue. 

The act should impose separation between the retail and banking 

services. Restrictions on locations and cross-marketing efforts 

should be imposed. If retail chains are invited into the banking industry, they should be available to offer only limited services, and 

their roll-out should be staggered. The committee should not open 

the doors too widely. 

Four, preservation of minority banks by section 308 of FIRREA. 

Pursuant to sections 301 and 308 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, FIRREA, Congress 

13

has mandated that the FDIC and the OTS conduct activities that 

recognize and preserve the special and unique status of minorityowned financial institutions. 

Over the years this legislation has lost much of its relevance and 

impact. As a result, the number of minority- and women-owned 

banks is decreasing. This regulation should expand to include other 

regulatory bodies, and the regulators should be instructed to undertake deliberate efforts to foster the number and competitiveness 

of minority institutions. Additionally, regulators should provide minority banks the first opportunity to acquire troubled institutions 

or other banks or savings institutions that are being divested. 

Conclusion. The NBA suggests that this historic legislation be 

modified to ensure the continued vitality of minority- and womenowned banks in America. We look forward to working with the subcommittee and its staff to accomplish this goal. 

We thank you for this opportunity to testify, and I am available 

for questions and comments from the distinguished panel. Thank 

you. 

Chairman BACHUS. Thank you, Ms. Hart. 

[The prepared statement of Norma Alexander Hart can be found 

on page 89 in the appendix.] 

Chairman BACHUS. And now we will hear from Mr. Buell. 

STATEMENT OF PHILLIP R. BUELL, PRESIDENT/CEO, SUPERIOR FEDERAL CREDIT UNION, LIMA, OHIO, REPRESENTING 

CREDIT UNION NATIONAL ASSOCIATION 

Mr. BUELL. Thank you, Mr. Chairman. 

Chairman Bachus, members of the subcommittee, on behalf of 

the Credit Union National Association, I appreciate this opportunity to express the Association’s views on H.R. 3505, the financial services regulatory relief act. This bill can be an important 

step to help alleviate the regulatory burden under which all financial institutions operate today. Instead of responding to the ABA’s 

misinformation campaign, we will devote our remarks to ways in 

which we can better serve our members and America’s consumers. 

I am Phil Buell, president and CEO of Superior Federal Credit 

Union in Lima, Ohio. 

According to the U.S. Treasury, credit unions are clearly distinguishable from other depository institutions in their structure and 

operational characteristics and have more limited powers than national banks and Federal savings associations. Given the limited 

time available, I will devote my statements to describing a few exceptionally important items for credit unions. Many of these are 

addressed in the recently introduced H.R. 2317, the Credit Union 

Regulatory Improvements Act, or CURIA, while some are incorporated in H.R. 3505. 

As part of our mission, credit unions are devoted to providing affordable services to all of our members, including those of modest 

means. One provision that this committee and the House have already passed would better enable us to meet that goal. I am referring to H.R. 749, legislation to permit credit unions to provide 

broader check-cashing and remittance services. 

Accomplishing our mission can also be greatly enhanced by revisiting two major components of the 1998-passed Credit Union MemVerDate 0ct 09 2002 13:28 Dec 28, 2005 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\DOCS\24988.TXT FIN1 PsN: MICAH
14

bership Access Act. With 7 years of experience, we have learned 

that what was thought to be good policy has actually new problems 

that need to be resolved to assure that credit unions can continue 

to meet their mission. 

The first of these issues is the current cap on member business 

lending. There was no safety and soundness to impose these limits, 

as the historical record is clear that such loans are even safer than 

other types of credit union loans. In fact, public policy argues 

strongly in favor of eliminating or increasing the limits from the 

current 12.25 percent to the 20 percent suggested in CURIA. 

Small business is the backbone of our economy and responsible 

for the vast majority of new jobs in America, Yet recent SBA and 

Federal Reserve Bank of Atlanta studies reveal that small businesses are having greater difficulty in getting loans in areas where 

bank consolidation has taken hold. The 1998-passed law severely 

restricts small business access to credit and impedes economic 

growth in America. This is especially important today as we all try 

to help to rebuild the devastated Gulf Coast where many have lost 

their jobs and need even more access to capital. 

Although few credit unions are currently bumping up against the 

cap, in a few years this is likely to change. For example, my credit 

union just started its full-service business lending program this 

year and has currently lent out 5.5 percent of our assets. We 

project we will hit the 12.25 percent cap within the next 24 

months. 

The situation is even tougher for small credit unions. Investing 

in expertise needed to run a member business lending operation is 

a very expensive proposition. With a 12.25 percent cap, they cannot 

make up the cost needed to run such an operation. 

Furthermore, the NCUA should be given the authority to increase the current $50,000 threshold as proposed in CURIA to 

$100,000. This would be especially helpful to small credit unions as 

they would then be able to provide the smallest of these loans without the expense of setting up a formal program. 

Another critical issue addressed in CURIA is the prompt corrective action regulations governing credit unions. Credit unions have 

higher statutory capital requirements than banks, but credit 

unions’ cooperative structure creates a systemic incentive against 

excessive risk taking, so they may actually require less capital to 

meet potential losses than do other depository institutions. And because of their conservative management style, credit unions generally seek to be always pacified as well rather than adequately 

capitalized. To do that they must maintain a significant cushion 

above the 7 percent level. For example, my credit union consistently maintains capital levels between 11 and 12 percent. Such 

high capital levels prevent us from providing our members with the 

best possible service. 

CUNA believes that the best way to reform PCA would be to 

transform the system into one that is much more explicitly based 

on risk measurement as outlined in CURIA. It would place more 

and greater emphasis on ensuring there is adequate net worth in 

relation to the risk a particular credit union undertakes. At the 

same time, CUNA believes credit union PCAs should incorporate a 

15

meaningful leverage requirement comparable to that in effect for 

other federally insured institutions. 

CUNA strongly supports CURIA’s new rigorous safety and 

soundness regulatory framework for credit unions, which is anchored by meaningful net worth requirements which are comparable to or stronger than bank PCA. And credit unions agree 

that any credit union with net worth ratios well below those required to be adequately capitalized should be subject to prompt and 

stringent corrective action. There is no desire to shield such credit 

unions from PCA. They are indeed the appropriate targets of PCA. 

Because of the cooperative funding structure of the National 

Credit Union Share Insurance Fund, credit unions are keenly 

aware that it is they who pay when a credit union fails. Reforming 

PCA along these lines would preserve and strengthen a fund that 

would more closely tie a credit union’s net worth requirements to 

its exposure to risk. It would also free up more capital for making 

loans to members and putting more resources back into our economy. 

Finally, we thank you, Chairman Bachus and others, for introducing and moving H.R. 1042 to address the pending issue before 

FASB that would cause undue hardship to credit unions by forcing 

them to change from the pooling method of accounting and for including it in H.R. 3550. 

In summary, Mr. Chairman, we strongly urge the subcommittee 

to act on this very important issue this year and to make sure that 

CURIA is a part of any congressional action to provide financial institutions regulatory relief. CURIA is our future. Without CURIA, 

millions of Americans will be deprived of a credit union able to respond to their needs. Thank you, Mr. Chairman 

Chairman BACHUS. I thank you. 

[The prepared statement of Phillip R. Buell can be found on page 

64 in the appendix.] 

Chairman BACHUS. Mr. Hayes. 

STATEMENT OF DAVID HAYES, CHAIRMAN, INDEPENDENT 

COMMUNITY BANKERS OF AMERICA 

Mr. HAYES. Mr. Chairman and members of the subcommittee, 

again, my name is David Hayes, and I am chairman of the Independent Community Bankers of America and the chief executive officer and president of Security Bank, a $135 million community 

bank located in Dyersburg, Tennessee, 85 miles north of Memphis 

in rural west Tennessee. 

I am pleased to testify on H.R. 3505, the Financial Services Regulatory Relief Act of 2005, introduced by Representatives Jeb 

Hensarling and Dennis Moore. 

ICBA representatives have testified many times before this committee. Reducing regulatory burden remains a top concern and 

focus of community banks. We strongly endorse the HensarlingMoore initiative. It demonstrates their understanding of benefits of 

regulatory burden relief for communities that they represent. 

ICBA especially appreciates the fact that the bill includes five 

provisions from Representative Jim Ryun’s Communities First Act, 

H.R. 2061, that are of particular interest to community banks. By 

lifting the yoke of regulatory burden from our banks, the CommuVerDate 0ct 09 2002 13:28 Dec 28, 2005 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 G:\DOCS\24988.TXT FIN1 PsN: MICAH
16

nities First Act would allow community banks to focus our resources on serving our communities and customers more fully. 

CFA has gained tremendous bipartisan support in the House 

with 75 sponsors and was introduced in the Senate as S. 1568 with 

three sponsors. A total of 44 State banking associations have endorsed CFA. H.R. 3505’s CFA provisions would direct the agency 

to streamline call reports, permit communities banks to file short 

form call reports, expand the eligibility for the 18-month exam 

cycle to banks with up to 1 billion in assets, expand the eligibility 

of bank holding companies for simplified reporting to 1 billion in 

assets, and exempt banks from having to send out annual privacy 

notices if they do not generally share information and have not 

changed their policies. 

We urge the committee to consider adding the following provisions to H.R. 3505. Require Federal regulatory agencies to consider 

the effect of regulations on community banks, relax the Truth in 

Lending Act 3-day right of rescission in certain cases to give consumers quicker access to their funds. Update limits on loans to officers and directors to account for inflation. Update the limits on 

management interlocks to make it easier for community banks to 

attract qualified directors. 

H.R. 3505 also includes the ICBA-backed Gillmor-Frank language to limit the branching authority of industrial loan companies 

acquired or formed by commercial firms. The fact that Wal-Mart, 

the Nation’s largest and most aggressive retailer, has applied for 

what is an essentially a State banking charter highlights the urgency of this issue. This language would prohibit predominantly 

commercial firms from buying or establishing an ILC and using the 

new branching authority to establish a nationwide branching network. 

A recent GAO report found that the IOC parent companies are 

not adequately regulated and posed increased risk to the deposit 

insurance fund. Even though the FDIC examines and supervises 

ILCs, it is said it has less extensive authority to supervise ILC 

holding companies than the consolidated supervisors of bank and 

thrift holding companies. It continues that ILCs may pose more 

risk of loss to the bank insurance fund than any another insured 

depository institutions operating in a holding company. GAO has 

called on Congress to close this regulatory gap. 

In our testimony earlier this year, we emphasized that unlike the 

Communities First Act, the credit union bill, H.R. 2317, goes far 

beyond regulatory relief. The credit union bill is a powers enhancement proposal. While the Communities First Act includes no powers, no new powers, for anyone, ICBA strongly opposes new powers 

for credit unions so long as they have an unfair tax and regulatory 

advantage over community banks. 

There is one area where we believe credit unions very much need 

regulatory relief. Earlier this year the NCUA attempted to undermine two Texas credit unions’ ability to convert to a mutual thrift 

charter. ICBA strongly supports Representative McHenry’s bill, 

H.R. 3206, that would eliminate NCUA’s ability to micromanage 

the conversion process. 

We also urge the Congress to act quickly on legislation to provide 

relief to communities and community banks affected by the hurriVerDate 0ct 09 2002 13:28 Dec 28, 2005 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 G:\DOCS\24988.TXT FIN1 PsN: MICAH
17

canes along the Gulf Coast. I have highlighted that legislation in 

my written statement. 

ICBA very much appreciates this opportunity to again testify on 

the importance of regulatory relief to provide bankers with more 

time and energy to grow their hometowns. Thank you, Mr. Chairman. 

Chairman BACHUS. Thank you, Mr. Hayes. 

[The prepared statement of David Hayes can be found on page 

92 in the appendix.] 

Chairman BACHUS. And I thank all our witnesses today for their 

testimony. 

Mr. Israel and I, before the hearing were talking about that 

these reg relief hearings kind of are like Ground Hog Day because 

we have had so many of them. But I will say that the statements 

today sort of disprove that because we did hear some sort of new 

and more forceful testimony. I was actually glad that the ABA—

ABA testimony sometimes is dry and sometimes mundane, and I 

notice today it was very exciting and upbeat. 

Mr. ROCK. Thank you, Mr. Chairman. 

Chairman BACHUS. So that was quite different from sometimes. 

It obviously took positions on issues. So I don’t know that I would 

say I commend you for that, but obviously I will just note that. 

I want to say that this effort, which I think is a very good bill—

I think it is a wonderful bill that we have before us. As Mr. Hayes 

went down some of the people that have endorsed the bill, and I 

want to recognize John Butler, who is at my side, for his contributions along with Peter Barrett, who is behind me here; Emily 

Pfeiffer, who Mr. Castle has trained well and has worked very hard 

on this legislation, as well as Joe Pinder on our side. And I am sure 

that Chairman Frank would—I know that Ken Swab has worked 

very hard on the legislation. I would like to recognize you, Ken, 

and I know that your staff has worked very closely with our staff, 

and I think it has been a model of how we would work. 

There has been—I will say that some of your suggestions even 

today I think are good suggestions. Some of what you have suggested we will address in this bill, some of the things that there 

is a building consensus that we need to address. We work with the 

regulators and law enforcement. 

One thing that I am very optimistic on in working with and talking with Members of the Senate and Mr. Hensarling and Mr. 

Moore is our CTR provision, which I think is coming together very 

well. And I think we will have some probably minor tweaks to frequency and portability, and once we address those, we will—and I 

think maybe the major thing that we are going to revise is this 

thing about portability, which I think is problematic. 

Chairman BACHUS. I think we will come out with actually a better provision after the manager’s amendment that will build a real 

consensus with our colleagues in the Senate and law enforcement. 

And I will continue to work with the ABA and with the other associations as we do that. 

And at this time I am going to yield the balance of my time to 

Ms. Biggert, who has worked very hard on this issue. She is actually going to chair the hearing in my absence. And I think it is very 

appropriate that she do this. She is a very knowledgeable member 

18

of our committee. And I would have asked Mr. Ryan or Mr. 

Hensarling or someone else to chair the hearing, but because many 

other members have provisions in the bill, I think it is appropriate 

that Ms. Biggert chair the committee—either she or Mr. Lucas—

so at this time I recognize her. 

Well, I will let you stay there. 

Mrs. BIGGERT. [Presiding.] Thank you, Mr. Chairman. 

First of all, I would like to welcome all of the panelists and thank 

you for your testimony. 

Ms. Hart, you highlight your concern about the large retail operations entering the banking business. Could you expand a little bit 

on your concerns? 

Ms. HART. Well, there has been some concern about companies 

such as Wal-Mart—not that we are against them because they are 

putting banks in their stores—but since our banks are so small, we 

are concerned, you know, we don’t want to lose any banks, so that 

is our concern. Competition would be pretty strong. 

Mrs. BIGGERT. Are you aware that there is language, including 

that which has been authored by Representative Gillmor and 

Ranking Member Frank, that sets an 85 percent threshold of an institution’s revenues must be generated from financial interests? 

Ms. HART. Yes. 

Mrs. BIGGERT. Would that alleviate your concerns? 

Ms. HART. We would like to see it happen. We are just not sure 

at this time. I need to see a little more regarding it. I have met 

with some of the people from Wal-Mart and they assure us that 

they want to work with some of our banks. 

Mrs. BIGGERT. Thank you. 

Mr. Hayes, you talked about this too, and I think you have got 

in your testimony quite a bit of materials about Wal-Mart. Could 

you address that issue? 

Mr. HAYES. Yes, ma’am. 

We certainly think the Gillmor-Frank amendment is a start. I 

think if Wal-Mart or any other commercial entity had to operate 

under the supervisory rules of the Federal Reserve and the Bank 

Holding Company Act, I think that puts the same muster in the 

operation that we have for community banks. You know, I’ve seen 

what a Wal-Mart does to communities. I have seen the empty 

stores. I have seen Joe’s Hardware Store go out of business. I have 

seen a local retailer have to go to Wal-Mart to purchase the soft 

drinks to sell in their store. They are a monopoly. They control the 

market. 

And I think that credit and investment issues in our communities, if we don’t wrap that tight, we will live to regret the day 

that they have that authority to control the credit needs of the consumers in our markets. I am very passionate about it. I live in a 

small community. We have a Wal-Mart. I go there. I don’t like to 

go there, but unfortunately it has run out those core mom-and-pop 

entities that we all know have built this great country. We have 

got to put the teeth into law to control that movement into this 

business segment. 

Mrs. BIGGERT. Do you think that that 85 percent threshold would 

have any effect on what they could do? 

19

Mr. HAYES. Oh, there are always some things that will have 

some effect, but I am very passionate that we have got to take this 

all the way to the wall. 

Mrs. BIGGERT. Thank you. 

Mr. Rock, would you care to comment on that? 

Mr. ROCK. Well, we support the proposal that is currently in the 

bill that would prevent commercially owned ILCs from de novo 

interstate branching. We support that proposal. 

Mrs. BIGGERT. But how about this; would you support the 85 

threshold, or would that not happen at all? 

Mr. ROCK. I think the 85 threshold is something that would probably work. 

Mrs. BIGGERT. Okay. 

Mr. Buell, do you have any comment on that? 

Mr. BUELL. Actually, no comment on that. 

Mrs. BIGGERT. How about Mr. Beal? 

Mr. BEAL. We share the concerns about Wal-Mart unduly commanding a large segment of the market. 

Mrs. BIGGERT. Thank you. 

With that I will yield back the time. 

Chairman BACHUS. [Presiding.] Thank you. 

At this time I recognize Ms. Maloney. 

Mrs. MALONEY. I would really like to follow up on Ms. Biggert’s 

questioning. And I think she raised some important points. The 

GAO report released earlier this year also suggests that ILCs may 

need more Federal oversight regulation than is presently in H.R. 

3505. And I would like to ask Mr. Hayes and Mr. Rock or Ms. Hart 

or anyone else, what specific dangers do you see from the ILCs, 

and what other safeguards would you like to put in the bill if you 

think there should be more restrictions put in? Anyone? 

Mr. HAYES. I will start. You know, Wal-Mart’s application to 

form an ILC is focused in their application to provide payment 

services. You know, I can set up a whiteboard in this room and explain to you how that ultimately would control the delivery of financial services to our consumers. I think the expansion that we 

feel will come—and you can go back to history and see how that 

organization has expanded—I think putting them under the regulatory authority of somebody like the Federal Reserve makes a big 

statement. It says you have to play by the rules. 

And you know, we operate today as a financial institution under 

Federal Reserve rules and regulations. And I really feel strongly 

that any entity that is going to be in the financial services arena, 

especially an ILC, needs that, that oversight at that level, not just 

the FDIC, but a Federal Reserve oversight that looks beyond just 

one little segment. 

Mrs. MALONEY. Anyone else wish to comment? 

Mr. ROCK. Yes. ABA has always opposed the mixing of banking 

and commerce. That is our principal concern. We feel that the mixing of banking and commerce would create risks in the creditgranting process. And we also think that it would create a very 

risky concentration of economic power. And the economies that 

have gone down the road of mixing banking and commerce have 

struggled with it. So that is our principal concern there. 

Mrs. MALONEY. Thank you. 

20

Mr. Rock, there was a great deal of discussion in this panel from 

the members and from the panelists, and also from people you 

meet just walking down the street, about the burden of the CTRs 

and the SARs and the PATRIOT Act. This is a very serious issue 

because we want to crack down on money laundering and terrorist 

financing. 

But could you just expand more what the burden is, why relieving that burden will not hinder FinCen and other FBI units and 

so forth that are cracking down on money laundering and terrorism? 

Mr. ROCK. Absolutely, Congresswoman. And we think it is important. We want banks to play our role in trying to track down and 

eliminate the bad guys. We want to play that role. But I think 

what we have to keep in mind is that the CTR requirements that 

are currently in place were enacted 35 years ago. And since that 

time, we have had other provisions enacted; for example, the SAR 

requirements which were enacted about 10 years ago. And under 

the PATRIOT Act, we now have a 314(a) inquiry process. We think 

that those subsequent enactments are a more efficient way for law 

enforcement to prevent the types of illegal activity that they are 

looking to prevent than the old CTR process. 

I mean, for example, under the 314(a) inquiry process under the 

PATRIOT Act which was recently enacted, if law enforcement 

wants to find out all of the deposits at a bank of 10,000 and over 

that were made in the last 3 years, they serve something on the 

bank that looks essentially like a subpoena and they ask for all of 

the records. So they don’t have to go back to those CTRs that were 

filed. 

In my bank, we file about 80 CTRs per week. And we calculate, 

by our estimation, that about 80 percent of those 80 per week—

which is essentially 4 out of 5—have nothing to do with potentially 

criminal activity, and they are not being looked at by law enforcement. So we think that there is a lot of time and effort being wasted by bankers and by law enforcement in generating all of those 

reports when there are subsequent enactments that we think do 

the job in a more efficient way. 

Mrs. MALONEY. Thank you. 

And I would like to ask Mr. Beal, some banks have argued today 

and otherwise that large credit unions should not enjoy a tax advantage because they do not meet the criteria of the Credit Union 

Membership Access Act. 

And would you like to respond to really, literally, some of the testimony today? I would say that I have represented many poor 

neighborhoods where the only banking services that were available 

were credit unions for the community. So I am a big supporter of 

credit unions, but I think that is a legitimate concern that was 

raised, and I would like to hear your response. 

Mr. BEAL. Yes, ma’am. And we are happy to comment on that. 

The tax exemption for credit unions runs to the structure of the 

credit union, not the size. Credit unions are not-for-profit, memberowned cooperatives. They are owned by their depositors. They are 

mutuals. And that is what makes them tax exempt. It is not the 

fact that they are big or little. Credit unions have a good record 

21

of reaching out to the communities that they serve, particularly the 

underserved communities. 

Since 2000, credit unions nationwide have adopted about 1,200—

actually, a little over 1,200 designated underserved areas, and 

placed branches in those areas to reach out and serve these underserved communities. 

So the tax exemption is based on the ownership structure by the 

members and the not-for-profit status of the credit union. And credit unions are doing a good job of reaching out to the underserved, 

big and small alike. 

Mrs. MALONEY. Thank you. My time has expired. 

Mrs. BIGGERT. [Presiding.] The gentlelady yields back. 

The gentleman from Texas, Mr. Hensarling, is recognized for 10 

minutes. 

Mr. HENSARLING. Thank you, Madam Chair. 

Mr. Hayes, let me allow myself to welcome you once again. As 

a Texan, we are always happy to welcome Tenneseeans. 

Mr. HAYES. Thank you, sir. 

Mr. HENSARLING. We appreciate the loan of Crocket to Houston, 

but given what your Vols did to my Aggies in the last Cotton Bowl, 

be very leery of wearing out your welcome. 

On Page 8 of your testimony you state: However, it is important 

to recognize it is far easier for most community banks to file CTRs 

rather than implement an exemption process. 

So your organization doesn’t seem to share some other organizations’ enthusiasm for the seasoned customer exception. Can you 

give me a little detail on why you feel your community bankers will 

have some trouble? 

Mr. HAYES. I think it gets down to the issue of defining in simple 

terms, so you don’t end up in a Monday morning quarterbacking; 

you know, we should have done this. So, you know, if you look at 

the complexity of regulation that we face—and certainly in the consumer and the CTR filings, you know, we work through lists. But 

the reality is they are somewhat nebulous. And so every time you 

are faced with filing, you have to look and determine, you know, 

am I making the right decision? 

So, you know, I think the complexity of what we have to deal 

with is the burden. And sometimes with limited staff—I mean, I 

have 50 people devoted to our banking operation out of 70. I am 

telling you, a lot of times they end up on my desk with our exemption book and saying, ‘‘Do we or don’t we?’’ And quite honestly we 

do, so we don’t get hammered. 

Mr. HENSARLING. So is it a fair assessment to say, using the 

phrase ‘‘defensive filings’’ that you feel that this exemption will not 

diminish the number of defensive filings to any significance among 

community bankers? Is that your position? 

Mr. HAYES. My position is that, but I think the solution is to 

raise the limit, raise the dollar limit. That way we are not dealing 

with as many of the situations that have to be there. We want to 

do our job. We are on the front line. We recognize that. But we 

have got to make this process work. And we think simplification of 

raising the limit is the easiest solution. 

22

Mr. HENSARLING. Mr. Rock, welcome once again to our committee. In your testimony, I think you say that CTRs have been 

rendered virtually obsolete. 

Would you answer the same question on the seasoned customer 

exemption and your feelings on raising the threshold in the CTR 

filings? 

Mr. ROCK. Let me say, first of all—and I haven’t had the benefit, 

Congressman, of reading ICBA’s written testimony for today yet, 

but I am familiar with the positions they have taken in the past. 

And I do think that what I have heard Mr. Hayes say in the past, 

and ICBA, is that the present exemption system that exists is so 

cumbersome that many banks do not take advantages of it. And I 

agree with that wholeheartedly. I think that is a little different 

from what we’re talking about with this seasoned customer proposal. So let me make that distinction, first of all. 

Secondly, in terms of saying that they are obsolete, as I said in 

response to Congresswoman Maloney’s question, we have many 

more efficient ways today for law enforcement to collect that information, and for us to give them the information, that didn’t exist 

35 years ago. 

That 314(a) inquiry process—and the last time I looked, it had 

been used 684 times by law enforcement so far this year—that 

314(a) inquiry process is much more specific and much more efficient. And that is why we think that filing those reams of paper—

and there were more than 13 million of those reports last year—

we think that that is what has become obsolete. 

Mr. HENSARLING. Mr. Rock, I think you are aware of the portability issue within the CTR context. There is still somewhat of an 

ongoing debate about its propriety. Could you speak to what burden it would be if we didn’t employ portability language? 

Mr. ROCK. Well, I think, quite simply, each time that someone 

changed banks, we would have to do it all over again. We would 

have another 1-year waiting period. And I think that that would 

substantially impact upon the number of CTRs that we would reduce. Now, by how many, honestly I can’t say to you because we 

haven’t lived under that regime yet. But I think that it could—the 

exception could engulf the rule, and we could—the new rule—and 

we could substantially reduce the number of CTRs that we were 

eliminating by the process. 

I understand the concerns of the committee, and we would welcome trying to work with you on better defining that portability 

issue. 

Mr. HENSARLING. I see my time has expired so I yield back. 

Mrs. BIGGERT. Thank you. The gentleman from Pennsylvania, 

Mr. Kanjorski, is recognized for 5 minutes. 

Mr. KANJORSKI. I will pass for the time, Madam Chairman. 

Mrs. BIGGERT. The gentleman from Tennessee, Mr. Ford, is recognized. 

Mr. FORD. Thank you, Madam Chair. I didn’t get a chance to 

welcome fellow Tennessean President Hayes who leads the ICBA 

effectively. Thank you, sir, for being here. Thank you for your comments. 

Ms. Hart, it is a pleasure to see you as well and see the National 

Bankers Association represented here this morning. I didn’t know 

23

if on any of the questions—I saw you were looking at some of your 

notes—if you wanted to answer or provide any insight or additions 

to what might have been said to the last two questions. I know Mr. 

Hensarling didn’t direct it to you; it looked like you might have 

been jotting something down. 

To Mr. Hayes, you spoke eloquently and you answered Jeb’s 

question, Congressman Hensarling’s question well. You talk a little 

about bit—we talk a little about how this bill will help institutions 

be more responsive in the case of a terrorist attack or a natural 

disaster. A lot of that we can kind of guess. But we have seen in 

recent weeks, last 2 weeks, some of your members from the area 

from along the Gulf Coast complain about some of the challenges 

they are facing. 

In addition to what is discussed and contemplated in this bill, 

what more could be done or should we be doing to help alleviate 

some of the burden that your members—and I would direct it also 

to Mr. Rock who is very passionate in his responses, if he wouldn’t 

mind sharing with us as well, some of his members who may see 

us do things outside this bill to be helpful. 

Mr. HAYES. Congressman Ford, thank you. We have early on 

been passionate about the needs on the Gulf Coast. You know, we 

have family; we have grown up there; and we have friends there. 

And you know, when you are faced with a disaster of the complexity that has been there, there are many things. And we have 

been very definitive in putting forth a list that is very long, of specific things. And rather than going through that in detail——

Mr. FORD. I have seen some of them. You have given me some 

of the two or three bills, things outside of the things in this bill, 

that could be helpful quickly as we try to consider things on this 

committee. 

Mr. HAYES. I think, you know, I would rather respond in writing 

back to you, Congressman Ford, on that because I would want to 

prioritize them. And I can do that in the next day for you. But I 

would say to you that action is first and foremost. We have got to 

do some things to help take away the paperwork burden. 

I am sitting here thinking about friends there that really don’t 

have computers to do the kind of things that they need to do in 

order to assist the people. And so we have got to figure out a way 

to say, okay, that is fine. If you don’t dot the ′′I′′ and cross the ′′T′′, 

you know—if somebody comes into my bank with a FEMA check, 

they may not have IDs. I need some protection. I want to help 

those people. I am passionate about helping those people. 

So I think we really are at a point where it is action. And specifically, you know, there are some things there that I would just like 

to write back to you today and tell you specifically. 

Mr. FORD. Yes. I know Ms. Biggert has a similar concern. We 

have read some of the problems that the SBAs have processing 

things and how lengthy the applications are. 

I know my time is up but, Mr. Rock and Ms. Hart, what you’ve 

heard from your members along the same lines and what, outside 

of what we are doing now, can we help to expedite the facility? 

Mr. ROCK. I would say the single continuing thing that comes to 

my mind from my discussion with my friends from Louisiana and 

Mississippi would be issues relating to indemnification for people 

24

cashing checks, taking risks that might be otherwise extraordinary 

but in this environment are necessary. You know, folks that come 

in with handwritten checks that have no printing on them but purport to be Government checks and they don’t really look like what 

we are used to seeing as Government checks. Those folks have no 

identification. And yet they are very, very needy. They need their 

money now. They need it to eat. And they need it for other important reasons. 

And we have had a lot of bankers like Guy Williams in Louisiana 

who has gotten some notoriety, people who have stuck their neck 

out a little bit. But I would hate to see those things come back to 

haunt them from the few that are less than on the up and up. So 

that is the issue that comes to my mind, Congressman Ford, indemnification issues for people cashing checks for folks in dire circumstances. 

Mr. FORD. Mrs. Hart? 

Ms. HART. We have three banks in the Louisiana area that are 

very burdened right now and had to leave, and some were operating in Baton Rouge, Appaloosas. They are having a rough time. 

So we really need some assistance with all of the things, the trials 

and tribulations that they are going through right now. 

Mr. FORD. Madam Chair, thank you for the liberty with the time. 

Mrs. BIGGERT. Thank you. The gentleman still has 22 seconds. 

Mr. FORD. We can’t count where I am from. We keep losing football games. I am glad Hensarling said something nice about us. 

But I am always delighted to see David Hayes. I wasn’t present 

when you were introduced. 

Mr. HAYES. Thank you for being here. 

Mrs. BIGGERT. Thank you. 

The gentleman from New Mexico, Mr. Pearce, is recognized for 

5 minutes. 

Mr. PEARCE. Thank you, Madam Chair. 

Ms. Hart, in your testimony you talk about potential for some of 

the provisions in the regulatory relief to help serve the underserved, the low income. Short description of what you think that—

how that might occur. 

Ms. HART. We have many banks that are in neighborhoods where 

they need the assistance to help their customers. 

Mr. PEARCE. And the rate relief has provisions in it that allows 

that to occur? 

Ms. HART. Yes. Also, with other banks coming in right across the 

street that may offer better services, that would worsen the effects 

of what they are going through. 

Mr. PEARCE. Forty-seven percent of my district is Hispanic, and 

they generally have below 50 percent utilization of the banking institutions. So you also mentioned that you thought the ILC should 

be limited, but if that were allowed, the staggered rollout should 

occur. How would you view a staggered rollout as being effective? 

Ms. HART. Well, I need to get more materials to you. But I just 

know that with those type of businesses there our banks would suffer because they wouldn’t be, you know, allowed to still continue 

what they do generally. 

Mr. PEARCE. Mr. Beal, Ms. Maloney had asked—Congresswoman 

Maloney had asked a question. And your answer, I think I missed 

25

one piece of that, and if you wouldn’t mind giving an answer to her 

question. You said that the tax provision is based on structure, not 

size. But her question dealt with membership, the broadening of 

membership. 

Would you try to answer that question with respect to membership of credit unions? 

Mr. BEAL. Yes, Congressman. I apologize if that answer——

Mr. PEARCE. Okay, Mr. Beal. 

Yes, I was looking at the other person. I have got my notes correct. 

Mr. BEAL. I have forgotten the question. 

Mr. PEARCE. Just about membership. 

Mr. BEAL. Oh, broadening the field of membership. The field of 

membership rules have been broadened somewhat over the years; 

there is no question about that. Credit unions remain limited in 

who they can serve. They are limited either to a specific employer 

or group of employers or a well-defined local community. 

So even though there has been perhaps some broadening over 

the years, they are still very limited. We are not open to the general public, to anybody in the whole word. 

Mr. PEARCE. And the credit unions do, like Mrs. Maloney said, 

serve a very valuable part of our constituency. There are communities of 2- or 3,000 people who don’t have it, so I do appreciate 

your presence in the communities. 

Mr. BUELL. Congressman Pearce, could I add to that as well? I 

agree with that. We are a community-based credit union there in 

Lima, Ohio, and we do have a fixed—as far as geographical area 

that we can serve. At the same time, we do try to do a very good 

job in terms of focusing on low to moderate income. 

One of the things that was in this bill that was very advantageous to us was to allow us to cash checks and remittance services to individuals without them becoming members just because 

they are in our area. We do have several individuals who are on 

banks, so we can actually serve them. 

At the same time, we maintain three branches within underserved communities, within the Lima area, and we have actually 

applied for an application and been approved, where we can go to 

another rural location that is an underserved community as well, 

so we can provide housing. 

Mr. PEARCE. You understand that Mrs. Maloney’s point was well 

taken, that there are many who argue that when you begin to 

broaden membership, then it begins to really negate the argument 

for the tax provisions. And I just want to make sure that we address that. 

Mr. Rock, you have I think drawn a conclusion that I share, that 

the economies that makes banking and commerce generally having 

difficulty. Would you give me your definition of commerce? 

Mr. ROCK. Well, I think that the efforts that have been made in 

some other legislation, which are proposed here, which say that if 

more than a certain percentage of your revenues come from nonfinancial activities, I think that that is probably a good way to go 

about defining what is financial and what is commercial. 

And I think that was the 85 percent rule as I proposed before; 

I think that is probably a workable rule. 

26

Mr. PEARCE. Actually, I was looking for a broader definition, not 

in banking terms of commerce, but that is okay. 

Mr. Rock—sorry, Mr. Hayes—you communicated deeply I think 

your feelings about Wal-Mart. And I understand that we have got 

small communities where the same thing has happened, but I also 

have small communities where the people are saying that my purchasing power now is going 20 percent further, and that is the 

value of competition. 

If we try to extend that one step—and I don’t think you and I 

are very far apart on the ILC’s—but in looking at the arguments, 

if we extend that concept of competition as being the question, how 

would you perceive that the ILCs are in danger, if you look purely 

from a competitive standpoint? You have Mr. Rock’s evaluation 

that mixing commerce and banking has been bad for economies. 

But your approach seemed to be from a competitive standpoint and 

what they have done in the communities. Can you give us just a 

little bit of an input there? 

Mr. HAYES. My position is Wal-Mart should not be in the banking business. 

Mr. PEARCE. I understand, but you don’t like them in the communities and you don’t like what they have done in the communities, but yet they have extended purchasing power which has allowed our economy to stay growing pretty strongly. 

Mr. HAYES. No question. And I have stated that it is an economic 

issue in our community that provides services and products, primarily products that may not have been available in rural markets 

if you go back to the early days. 

But I think when you get to size, size can put you in a mode of 

control. And I think that the issue I see is the control that sets in 

one company—over 25 percent of the retail business in this country 

is controlled by one entity—has pluses but it has a lot of minuses. 

I like to play the game on a level playing field. And I think that 

if you looked what that kind of company can bring—and a scenario 

would be if you have our checking account services, we will give 

you 3 percent off your purchases in Wal-Mart—somebody is paying 

for that. And I think that is the undue competitive pressure of mixing that banking and commerce, is that you can deliver that. 

I don’t mind competing. I don’t mind competing with anybody. I 

just like that the odds are level and we can suit up and play the 

game hard. 

Mrs. BIGGERT. Gentleman’s time has expired. Gentleman from 

California, Mr. Baca. 

Mr. BACA. Thank you, Madam Chair. 

My question is for Mr. Beal. Mr. Beal, providing relief for the recent hurricane has been the top priority for Congress and will be 

for some time. Which of the credit union provisions in the regulatory relief bill, if passed swiftly and signed into law, would make 

it easier for victims, both credit unions and members, to get back 

on their feet? 

Mr. BEAL. Sure. Thank you, Congressman. I think one of the provisions certainly would be the remittances and check cashing. I 

know in our community in Las Vegas, we even have folks from 

Katrina who relocated out there. And they may or may not be a 

member right now, but if we can help them with check cashing or 

27

remittance, wire their money back home or off to relatives, I think 

that would be quite a relief for us and certainly for the credit 

unions in Louisiana and the Gulf Coast area that would help them 

as well. 

Mr. BACA. Mr. Buell? 

Mr. BUELL. I agree with that. One item, first of all and foremost, 

is help them do basic financial services. The one nice thing within 

the regulatory relief bill was also exempting the faith-based loans 

from the business cap. So, again, helping rebuild churches, help rebuilding other faith-based organizations in those areas, credit 

unions can hopefully step up and help in those areas as well. 

Mr. BACA. Thank you very much. I think that is why it is very 

important that we do take up this legislation and provide services—and this would be swift—and signed into law and be able to 

provide that kind of assistance. 

My next question is for Mr. Beal. In your testimony you made 

reference to a study issued by the Small Business Administration 

that details the decline of small business credit availability. One of 

the concerns that I have is minority-owned businesses only comprise about 15.1 percent of all businesses. And we know that 

throughout our Nation they are basically growing in each one of 

our communities, and an empire is made up of basically small businesses. 

Can you explain why credit unions are uniquely positioned to fill 

the gap in services to small business owners lacking access to capital and how the provisions of CURA to raise the current 12.25 cap 

to 20 percent and the loan size from 50- to 100,000 would help 

credit unions better serve the members who are small business 

owners? 

Mr. BUELL. Be very happy to answer that question. We at Superior, this past year we started up our full service member business 

lending program. Before we just did 1- to 4-family and rental properties type things. But since we actually brought a commercial individual on board, we have had just great success with our members. They have been asking for these types of loans. 

And when we talk about large loans, our average size is about 

$100,000. And I am concerned right now when I see that, as we 

mentioned in our testimony, we are at 5.5 percent already. And we 

project if we keep seeing the same member demand that we see 

right now, we will be at 12-1/4 percent cap in the next 12 months. 

Banks in our area, have some good banks and good—great community banks. But when you take a look at the $100,000 dollar 

loan, the $50,000 loan, and the $75,000 loan, the local institutions 

might be wanting to say, yes, we will do that. It might be 2 or 3 

weeks before we get back to them because of the size of the loan. 

We can step in right away and help fill that gap and provide that 

type of capital. 

We are helping the small business owner; we are helping the 

landscaper, the guy opening the flower shop. We are actually financing an Amish fertilizer truck. These are different types of 

loans small business is looking for that we are willing to step in 

and help make. There is a demand out there. We just didn’t grow 

that quickly over 6 months by making risky loans. We have made 

28

very good, nice, secure loans. There is a strong demand out there. 

We are going to need some relief. 

Mr. BACA. So the availability to provide small business loans 

would be a lot better and can be provided to the credit unions because you have direct access to individuals—and in the growth and 

population. 

Ms. Hart, you mentioned in the other case, in the banking industry, you are very much concerned that there is lack of services or 

that we need to address to make sure that the banking industry 

continues to provide assistance to minorities and women. So apparently—is the banking industry having a problem in reaching out to 

minority businesses or not, or do they need to work in that area 

to make sure they ensure that a certain percentage also goes to minorities and/or women? 

Ms. HART. Yes. Businesses need to support minority-owned businesses as well as banks. 

Mr. BACA. Why isn’t the banking industry reaching out like the 

credit unions are reaching out to small businesses within the communities? 

Ms. HART. We are reaching out, sir. We just have not gotten a 

strong enough defense and help in that area. 

Mr. BACA. Thank you. Mr. Hart, in your testimony—and I want 

to stand corrected—it seems like you are not open to competition 

at the very beginning of your statement. Is that true or not? Or do 

you believe in open competition? Mr. Hart? Mr. Rock, I am sorry. 

Mr. ROCK. I am sorry, Congressman. I thought you were addressing Mrs. Hart. 

Mr. BACA. No, I meant you. It seemed like in your statement you 

weren’t open to open competition. At least that is what I thought 

I heard. 

Mr. ROCK. No. I think quite the contrary. We welcome competition. I don’t know whether you are addressing the ILC issue or 

credit union issue, but with regard to ILCs what I said is we are 

not afraid of competition. We are afraid of the consequences of the 

mixing of commerce and banking. That is what we are afraid of. 

With regard to credit unions, we are not worried about competition at all. We want to compete on an even playing field. The credit 

union next door to my bank is over $2 billion. They are more than 

double the size of my bank. They can do business with everybody 

that I do business with, and they offer every single product. Their, 

quote, ‘‘local community’’ is over 2.8 million people, and yet they 

pay no taxes. And we pay taxes. They are not tested on CRA, 

whether they lend to minorities and small businesses, but we are. 

That is not equal competition. I welcome equal competition and 

suggest that they should convert to being a mutual financial institution. 

Mr. BACA. But they are providing a service which is good. 

Mr. Hayes, I know that my time has expired, but you touched 

on something that is very important to a lot of us that we have 

looked at, and that is when you mentioned Wal-Mart. What provisions would you suggest need to be done when you look at the competitiveness and what they are doing right now that needs to be 

regulated? 

29

Are there any suggestions or provisions that you have or recommendations as you look at Wal-Mart versus any other institution? 

Mr. HAYES. I think there is a—you are speaking of them getting 

into the ILC? 

Mr. BACA. Yes. 

Mr. HAYES. I think falling under the Bank Holding Company Act 

and having to comply with the Federal Reserve oversight, if such 

charter were granted to them. I think that is where the rubber 

meets the road because, you know, they are so large that you can 

carve it out and you are not going to really effectively look at it. 

It has to be the total impact and what are the items that are going 

forth in their company that are across those lines between the retail side and the other. And we are not afraid of competition, absolutely not. We just want it fair. And the regulations have to be 

there. 

And I would like to respond on the credit union items just a second. I am not afraid of competition. I am not afraid of competition. 

And I will tell you, we serve our communities. We serve our customers. And they have my phone number and I am out there. I am 

doing those things. So it is not an issue of service. It is not an issue 

of service. It is an issue of fairness. 

Mr. BACA. Good. We all need to do that. Thank you. 

Mrs. BIGGERT. The gentleman’s time has expired. The gentleman 

from Texas, Mr. Neugebauer. 

Mr. NEUGEBAUER. Thank you, Madam Chair. I want to go back 

to the regulatory relief portion of our discussion here. There has 

been a lot of discussion, as I have traveled around community 

banks, about CTR and SAR provisions in this bill and because it 

is, quite frankly, creating a lot of paperwork and a lot of issues for 

our community banks. 

And I guess I would like for some discussion or response, say, to 

have we gone far enough in this bill or should we have done more? 

So I will just kind of go down the line there. Mr. Beal? 

Mr. BEAL. Thank you, Congressman. For our credit union, it is 

a burden as well, although maybe not to the extent of some of the 

community banks. We file about 40 to 50 CTRs every month. Since 

we are mostly a consumer organization, we don’t encounter perhaps the volume of transactions or at least the size of the transactions that others do. But we do need some relief there, and it 

does consume a substantial part of our resources and assets due to 

that. 

Particularly the area we struggle most is with the structuring 

issues where we need to try to detect where aggregate deposits exceed the threshold amount. And that is going to require some further programming, some further changes on our side. 

And so I would also echo the comments of some of the other panelists, that a lot of these things are submitted, perhaps it is a disservice to law enforcement as well because they can’t really deal 

with the volume that they are getting. 

Mr. ROCK. I think that the proposals that have been put forth 

in connection with this bill would go a long way toward reducing 

those needless piles of paperwork. I think that the item that is not 

currently in the bill, but there is kind of a place for it, would deal 

30

with the seasoned customer. If you have had a seasoned customer 

for more than a year in a transaction that counted those, you 

would not have to file CTRs. I think that would go a long way to 

eliminating the piles of paperwork. 

I think the other provision that is in the bill which has to do 

with stopping the reports of SARs necessarily to the board of directors, I think that is a micro-managing type of report that is meaningless to my board, and I think that that provision in the bill 

would also go a long way towards starting to cut down on some of 

the meaningless paperwork. 

Ms. HART. I applaud this bill, and we would like to work closer 

with Congress to find a niche for the minority banks so they 

wouldn’t be burdened as much as they are. 

Mr. BUELL. The CTRs who do not file $174 million on the average member account size is about $4,800, so we do not have to file 

very many of them. At the same time, we do concur in streamlining 

the process and actually having the regulation to do what it is intended to do, which is to catch the bad guy versus making other 

Americans having to be subjected to this. 

Mr. HAYES. First, I think that we need to raise the limit. Secondly, let me respond, then, on the SAR issue. It is frustrating to 

file a SAR and, you know, get a call back that says that is not large 

enough for us to take our time. So I think you sit there and you 

say I am doing what is right; I am doing what is required of me 

as a banker and as an American, and yet I reported something, 

and it is not big enough. 

It is not big enough. I lost money maybe. It is not big enough. 

So, you know, I think we have to understand that bankers every 

day are on the line, eyeball to eyeball with their customers, and filing this paperwork that really in some cases gets no results. It just 

tears your heart out to say, how can I motivate my people to keep 

doing this? And so I think raising the limit up to where it is inflation adjusted, that is a great start for all of us. But I think because 

so many are filed, and the dollar amount may not be big enough, 

is a demoralizing thing for somebody who is on the front line. 

Mr. NEUGEBAUER. Mr. Rock, have you heard an examiner say 

you are not filing enough SARs and you are not filing enough CTR 

reports? Do you ever experience that? 

Mr. ROCK. I have not personally, Congressman, but I have had 

it reported to me by many of our constituent bankers that they 

have told them that that is the problem. They say you are not filing enough, and I say I didn’t know there was a quota system in 

any reg. And they say there isn’t a quota system. I said, well, I 

don’t understand. It is just not enough for a bank your size. We 

want to see more. 

I think it is those types of discussions in the field with examiners 

that have resulted in the so-called defensive filings. People have 

kind of shrugged and said, well, if they want more, I will give them 

more. 

And I am concerned not only about the time and effort and wasted banker time and money, but I am concerned about the broader 

issue about what that does for our law enforcement efforts. I think 

that it drowns the law enforcement people in piles of paper and, 

in fact, is counterproductive for law enforcement purposes. 

31

Mr. NEUGEBAUER. I see my time has expired. Thank you, Madam 

Chairlady. 

Mrs. BIGGERT. Thank you. The gentleman from Pennsylvania, 

Mr. Kanjorski. 

Mr. KANJORSKI. Thank you, Madam Chair. I apologize for getting 

here late, but I love to enjoy the food fight. I thus appreciate some 

of the comments. I am certainly not mocking or making fun of Mr. 

Hayes. 

Mr. Hayes you said you want to compete on an even playing 

field, but yet you do not want to compete with a credit union, and 

then you defined why they differ. We, however, are here trying to 

provide easier access to activities by banks, credit unions, and 

every financial service institution. 

I also noticed you really did turn white with the mention of ILCs 

and the United States and Wal-Mart’s application for one. 

I think there are challenges out there. If I had my druthers, we 

would go back to the drawing board and have only one type of financial institution in the country. Then we would have a very different marketplace—but we all know that is not the case. We have 

all these institutions built for different reasons and at different 

times stimulated for different purposes. 

I actually think I have two things I am interested in. One, I have 

always been interested in economic developments. And some of the 

questions here mentioned how can we facilitate the small businessman—faster response, need for money. Sometimes very larger institutions really aren’t interested. It is not their fault. It is just they 

have other fish to kill. And on the other hand, we have this big 

800-pound gorilla out there that is saying let me into the game. 

And if they get a license, it will be maybe not letting them into 

the game, maybe at the end of the game for a lot of you fellows, 

community bankers, independent bankers that I am interested in. 

So I am not sure your artillery isn’t directed at the wrong front, 

if you will. 

You probably have differences. All of us in Congress have been 

trying to work out that common, fair, playing field, taking into consideration all the nuances and structures of the institutions. But a 

very fundamental question is going to be made in the next several 

months or years. And certainly some of my colleagues are getting 

extreme pressure. 

I want to be frank. Up until this point, to appeal to you, Mr. 

Rock, I have been hard core. I really believe there should be a separation of banking and commerce. When I sat on the conference 

committee for the Gramm-Leach-Bliley Act and we almost got the 

nose under the tent—myself and several other colleagues were vicious in our fight. And I tend to remain that way, although I say 

that, hey, if intrafinancial service providers are going to start 

throwing Molotov cocktails and internal attacks, the best way for 

us to solve that problem is to say, you really want open competition? Absolute, open competition in every stretch of the imagination? Qualify the ILCs from Wal-Mart, tear down the wall between 

banking and commerce, and let you guys all go at it. Unfortunately, we will pick most of you up as casualties. And it is sort of 

unfair for you to say we want to compete on an even playing field. 

Well, you know, you really don’t. You really don’t. Nor can you. 

32

Let me recall something for many of my colleagues that are here 

for a limited period of time. In the 1991 Congress, a famous Senator, who chaired a committee of equal jurisdiction in the Senate, 

and the President of the United States sent us some indications 

that they wanted to institute a 10-1/2 percent interest rate on credit cards. I don’t know if all of you were in banking in 1991, but the 

banking industry in 1991 was probably in a negative position in equity. They were the next savings and loan crisis of even much larger proportions. And the appeal of putting a cap on credit card 

charges certainly appealed to this side of the aisle’s constituents. 

But it would have stripped the capacity to build the equity of 

banks. And rather than doing the political thing, we did the rational thing. We said, let’s see if we can’t—not to have a government 

program for rescue or disaster and then a rescue occur for banks—

let’s see how they can work it out. And they did. Quite frankly, we 

reconstituted the equity of banks in this country for a period of 

time of 2 or 3 years and allowed them to be more competitive even 

in the credit card field, which is good. 

That is what Congress is all about, to give an opportunity for 

someone to breathe before they have to get up and run. 

And I would just like you all—I am not going to really ask any 

question, unless you have something you can tell me what you can 

do for economic development. But you know, rather than this 

intrafinancial service industry food fight that we tend to have on 

a periodic basis, why don’t we all think about what we can do for 

all of the institutions to make them serve better, be more competitive, make more money, and maintain the wall between commerce 

and banking? Because quite frankly, you use all your energies 

fighting each other. Our solution is open it up to total competition. 

Let the ILCs in. 

And I can tell you, my prediction is Wal-Mart will eat you all 

alive. They will eat the credit unions alive, the community banks 

alive; they will eat even the big banks alive. Nobody could withstand that type of 25 percent retail. It is mind-boggling. Of course, 

nobody in America that works for a living will have any pensions; 

they won’t have any health care; and they will be making minimum wages. But, hell, that is what we want anyway, isn’t it? 

I want to ask you—I don’t want to put you on the spot—but if 

you can see anything that we can do in this Regulatory Relief Act 

to make it more attractive and simpler and easier to help stimulate 

particularly the middle and small business communities, with 

whatever institutions. Certainly I have been very instrumental in 

encouraging credit unions to fill that void out there, but if there 

are other things we can do, let us know. 

I do certainly encourage—I have been a big supporter and we 

will bring that government-sponsored enterprise bill. I think that 

is very important, to have the Federal bank system interact with 

the banking community and make funds readily available that can 

be used for these purposes, but I would be interested in it. 

If you have any ideas, certainly let me know and let the committee know what we can do. We are going to be marking up these 

bills in the next couple of weeks. Maybe we can do something constructive. 

33

Mrs. BIGGERT. The gentleman’s time has expired, but I knew 

that there would be somebody who would come along to stir the 

pot, but thank you for your comments. 

The gentlelady from Wisconsin, Ms. Moore. 

Ms. MOORE OF WISCONSIN. Well thank you, Madam Chair. I 

guess I would like to associate myself with the comments of Mr. 

Kanjorski to a certain extent. You know, I was sitting here listening very carefully to the questions and some of the responses of the 

distinguished panel. And I find that we are really, as Members of 

Congress, on the horns of a dilemma. I certainly—and I guess I am 

making a statement more than a question—I am sympathetic to 

the banking industry about the, what, depends on whose numbers 

you believe, $42 billion a year that it costs to regulate, to be regulated. But at the other end of that dilemma really are terrorists 

funding. The sex trade, we have heard testimony in the subcommittee about the sex trade yielding as much or more than all 

the military budgets in the world. We hear your concern about the 

CTRs and about getting some regulatory relief around so-called 

seasoned customers. And we hear about the banks not being responsive to smaller businesses and minority- and women-owned 

businesses. 

We hear the credit unions who serve a particular constituency. 

I started a credit union from scratch myself. I love credit unions. 

And I appreciate that it is a movement more than anything else, 

because they do, as you have indicated in your testimony, Mr. 

Buell, have a real mission. These are member owned, democratically operated, not-for-profit organizations, and have volunteer 

boards of directors. But yet you would ask us for more powers to 

raise the cap on the amount of business loans that you can provide, 

and to have the capacity to examine third-party vendors. You want 

a separation of banking and commerce. But at the same time, you 

want to sort of blur the lines between this member-owned business 

and getting out there into the marketplace. 

I guess if I were to ask a question of any of you all, the first 

question I would ask is, when we look at trying to, you know—so 

this is the horn of a dilemma, because I do think that things like 

this, for example, the sex trade proceeds. I mean criminals seek socalled seasoned customers, or they develop—if we were to believe 

any of the old crime boss movies, that legitimate businesses are established to launder money through it. 

So I guess I am asking for you to point to us what provisions in 

this Regulatory Relief Act are too onerous and what do you see as 

a streamlined way. Just point to us what provisions in H.R. 3505 

are going to accomplish both the purposes of giving you some relief 

as well as sort of putting a kibosh on laundering money. 

And I would ask, Mr. Buell, about the credit union, about that 

dilemma. How can you have it both ways? How can you be a membership organization that meets the needs of your members and yet 

seek authority to really put capital out in the more commercial 

world? Thank you. 

Mr. BUELL. I would be happy—it is directed to me. I would be 

happy to answer the question. You know, I think at Superior—I 

speak on behalf of us—we are a member-driven organization. I 

have members that are low income, and the service that they are 

34

looking for us is to cash a check on a weekly basis and not charge 

them a fee, and we do that. I have members who want used car 

loans so they can go to work, and we happily do that for them. We 

have members looking to buy their first home. And we do a very 

good job of that as one of the leaders in our community, as far as 

doing that. 

When we talk about expansive or little broader powers, the one 

thing we are seeing right now, again, is that void with the small 

business loan. Is that a riskier loan? It is not. Actually, for us it 

is a much safer loan. Of the ones we have done already right now, 

we have absolutely zero delinquency with these loans. But there is 

a void out there. We are trying to fill it. 

No matter how a member comes to me, whether it be for a small 

business loan, whether it is for their first child’s savings account, 

my job is to help facilitate it. I think sometimes I am the intermediary between a saver and a borrower, and as a cooperative they 

are coming together to pool their resources. And my job is to help 

facilitate that, and that is why I need additional regulations to give 

us more help in doing that. 

Mr. ROCK. I appreciate your desire to balance the need for catching the bad guys, finding money launderers, with also wanting to 

reduce needless regulation. That is what we want, too. I think, for 

example, we have a lady in my bank who has been in her job for 

more than 30 years. She is the one who works on identifying socalled suspicious activity and then filing the SARs. 

If her and her staff, if they are spending most of their time filing 

the CTRs from 35 years ago and just filing these huge amounts of 

paper, that prevents her from spending as much time on the SARs, 

which is really identifying truly suspicious activity—a much more 

limited number of reports, fewer pieces of paper, but more meaningful pieces of paper. 

We are not suggesting changing those SAR requirements at all. 

I think that is the more effective area for both bankers and law enforcement people to spend their time. 

Mrs. BIGGERT. Gentlelady’s time has expired. 

Ms. MOORE OF WISCONSIN. Madam Chair, thank you for your indulgence on the time. I had one follow-up question for Mr. Buell, 

but, Ms. Biggert, your indulgence is required. 

The other part of my question—thank you so much, Madam 

Chair. The other part of my question to you was, you know, you 

seem to agree with everyone on the panel that we need to separate 

commerce from banking. You don’t agree with that? 

I did really appreciate your sort of delineating the services that 

you provide to members because indeed I think that is the mission 

of the credit union to do that. But once a member wants a loan 

for—you know, not working-out-of-her-home type mom thing—I 

just want to buy a computer so that I can work out of my home 

during maternity leave and catch up with my e-mails, why then 

don’t we send those same customers to a bank? 

You know, once they are in a position where they actually want 

to be a housing developer, want to build a community, apartment 

building for low-income housing, why do you see that as your mission? 

35

Mr. BUELL. Well, first of all, I would like to clarify. On the ILCs, 

we really do not have a position. As far as we do understand the 

concerns, we think, you know, no one has the right to dictate that, 

you know, the business practices of that with the ILCs. On the 

other side of what she was talking about, you know, the small business loans, there does there come a time where it matures and it 

gets handed off to a larger organization. And there are going to be 

times that is going on happen. I mean, we are going to help someone get started, and they are going to want to do a land development loan. And they are going to want—you know, in my case, my 

average loan size is $100,000. They are going to want $3 million. 

We have a good relationship with our local bankers. They send us 

some business, and we call them up with someone we trust and 

say, here is what this individual is wanting to do. They are wanting to improve their community. You know, if we can help facilitate 

that, my job is to help the members. Sometimes I am the best deal. 

Sometimes I am not. But whatever case that is, it is our job to advise them, educate them, and to help them to do what they need 

to do right there at home. 

Mr. MOORE. Thank you. 

Mrs. BIGGERT. [presiding.] The gentlelady’s time has expired. 

The gentlewoman from Indiana is recognized for 5 minutes 

Ms. CARSON. Well, thank you very much Ms. Chairman, and I 

apologize for being late. I had two committees at the same time, 

transportation, entertaining information from Wynton Marsalis 

and the Governor, et cetera, from New Orleans and Mississippi, 

and I apologize for being late getting here. 

We have been hearing in the past subcommittee hearings, the 

Federal Reserve Board estimates that the banking industry spends 

about $36 billion to comply with regulatory requirements at both 

the Federal and the State levels. I certainly don’t want to impose 

that kind of cost on the financial industry. And while many regulations are in place to ensure consumer safety and enforce compliance with versus consumer protection statutes, some do prevent 

banks from effectively serving the public and drive up the cost of 

doing business. I have a bank around the corner from me where 

I live who stopped taking Federal checks on deposits from people 

who have no accounts at the banks. They feel like they are losing 

millions and millions a year by cashing those checks. Smart as the 

banking industry is, I am surprised you haven’t come up with a solution or a system whereby you can still serve the public in that 

way. Some people are afraid to have bank accounts. I guess they 

think back to the 1930s where people lost all their money in banking institutions. Notwithstanding, our job as a committee is to 

make sure that we find a balance between protecting the American 

people and their financial endeavors and protecting the industry 

and providing regulations to ensure effectiveness. So these hearings have been a great help to me in terms of trying to understand 

the banking industry has, in fact, come a long way. You have eliminated a lot of your bias that you had. 

Historically, it seems that you do a better job in weeding out all 

of that, but what I would like to know is, what does the financial 

industry, how do you respond to community investment? That is 

what is required by financial institutions. How do you respond to 

36

community reinvestment, and how do you explain trying to get rid 

of it? That is my question. You are trying to eliminate community 

reinvestment with resources. How do you explain that and still be 

accountable to the customers which you serve? I don’t make myself 

clear, do I? I have got a bad cold. I apologize, but try to work with 

it anyway. Okay? 

Mr. HAYES. I lost my voice over the weekend, so I can appreciate 

the struggle of doing this. I have been a community banker now 

for 15 years. I moved from a large metropolitan city to a community of 19,000 which has offices in a community of less than 2,500, 

less than 4,000 and less than 500. It is my responsibility to have 

the job that I have to ensure that my community and the people 

in that community grow, that they have a job. I spend an enormous 

amount of my time working trying to bring jobs to our community. 

I spend time working with schools to ensure that there is a connection between the education system and the private sector so that 

our young people will have an opportunity. I tell our young people 

every time, don’t do drugs, study, because it is, in fact, what you 

study and how you apply yourself is how you will be successful in 

this country. We spend an awful lot of money in our bank putting 

money into our community for those things—education, jobs and 

people. People come to us and say, we are doing this. Can you furnish us money to do that? We do the right thing. Sometimes it is 

tough to sit and document that you do the right thing. I mean, we 

are people. We want all of our citizens to have success. So the Community Reinvestment Act is sometimes a documentation of, did we 

do the right thing. 

And I can tell you sitting here, or wherever I go, I do the right 

thing for people in my community. And my community, you know, 

my average loan is less than this gentleman’s. My average loan is 

$25,000. I finance used cars. I finance computers. I do those things. 

I am a community banker. 

Ms. CARSON. Well thank you very much. I appreciate that. I have 

had a lot of town hall meetings dealing with financial literacy. As 

a matter of fact, Alan Greenspan was one of my principal speakers 

at one of them. I don’t know whether I think you should do it, but 

probably so. Educate the community on financial literacy encouraging young people to invest even if it is just $5 a week. 

Mr. HAYES. Congressman Ford and I have had many conversations about financial literacy, and you may not like my response. 

But you know, when a nation is running a deficit, it is tough to 

communicate to somebody you have to live within the means which 

they are afforded, and so we have to—Congress and those people 

that are on the line talking with these people have to say, you have 

got to concentrate on improving yourself through education and 

working hard, and we are there for you. 

I mean, I am passionate about this. And I can assure you, I wish 

as a young person I had had somebody there to help educate me. 

And I am willing to do whatever it takes. You know, if the Lord’s 

willing and I am going to be here a few more years, you know, my 

passion when I don’t have to come testify is to be out there helping 

young people understand the importance of education, not doing 

drugs, and understanding a dollar is dollar, and you have got to 

work for it. 

37

Mrs. BIGGERT. The gentlelady’s time has expired. 

Ms. CARSON. Thank you, Madam chairman 

Mrs. BIGGERT. The gentlewoman from New York is recognized for 

5 minutes. Mrs. Kelly 

Mrs. KELLY. Thank you, Madam Chairman. I apologize for being 

late. But I am very interested in what this panel has done. I have 

read testimony. I am very interested in what this is all about. I 

have a question about a bill that Mr. Royce and I have introduced 

that I would like to ask you your opinion on. We have introduced 

H.R. 1952. It would create a treasury certification system for foreign governments that will give our banks and their customers access to the best idea of what the U.S. Government knows about 

what other countries are doing without imposing a new bureaucratic structure on the private sector. I would really like your input 

on whether or not you think such a system would be helpful to you 

in dealing with foreign banks and foreign entities and foreigners 

themselves. And let’s start with anyone of you who is willing. You 

are all looking at me. This may be something that you are aware 

of. It may not be. 

But Mr. Beal, you are on this end, so I am going to ask you if 

you have got any comment on that. 

Mr. BEAL. Certainly. And thank you very much. It sounds like 

an interesting idea. I confess I wasn’t previously aware of it. We 

would be happy to take a look at it and study it a little further and 

get up to speed on it, but it does sound intriguing and interesting. 

And it may prove helpful to us because we have encountered some 

difficulties in outbound remittances particularly to Mexico and 

points south. So that could be helpful to us from that perspective. 

Mrs. KELLY. Good, that is what we are hoping, is that perhaps 

that might help reduce the regulatory angst that goes on about all 

the CTRs and SARs and so on. And so Mr. Rock. 

Mr. ROCK. Thank you, Congresswoman. I am not familiar with 

the terms of H.R. 1952, but I do think that, as Mr. Beal said, it 

is an intriguing idea to me. I think that perhaps some sort of certification process could be helpful to everyone on all sides, and we 

would like to work with you in trying to explore those pockets on 

whether or not it can be helpful. 

Mrs. KELLY. Thank you. 

Ms. Hart. 

Ms. HART. Thank you Congresswoman. I would like to see your 

bill also. Thank you for the opportunity. But for the most part, our 

banks don’t have a lot of foreign activity. But I would like to see 

your bill. 

Mrs. KELLY. Wonderful. 

Mr. Buell. 

Mr. BUELL. As Ms. Hart, as well I have not seen the bill, and 

we do not have a lot of foreign activity or any actual foreign activity with the foreign banks. 

Mrs. KELLY. All right. 

Mr. HAYES. It is an intriguing idea. I must admit I don’t have 

any knowledge of the bill. But having spent 9 days in China visiting with the banking authorities over there, you know, I think it 

is important for all of us to understand, you know, the impact that 

the foreign countries and their companies have on the business 

38

that we do. So it is something that we need to ratchet up and look 

at and deal with that, and we will respond to you ma’am. 

Mrs. KELLY. I appreciate that. Clearly, our emphasis is to try to 

help U.S. banks and anyone doing business with foreign entities establish some kind of a pattern so that you can go fearlessly about 

the business of doing business. And I would be very interested in 

any comments you have. I thank you very much. Madam Chairman, I yield back the balance of my time. 

Mrs. BIGGERT. Thank you. And with that, I would like to thank 

this wonderful panel for being here. Your expertise has been very 

helpful to us and as we move forward with this legislation and the 

markup. With that, the Chair notes that some members may have 

additional questions—I think we really got through an awful lot of 

questions today—but for this panel, which they may submit in 

writing. Without objection, the hearing record will remain open for 

30 days for members to submit written questions to these witnesses and to place their responses in the record. 

With that, the hearing is adjourned. 

[Whereupon, at 12:13 p.m., the subcommittee was adjourned.] 

(39)

A P P E N D I X

October 18, 2005

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